One year ago, we reported that in its attempt to calculate the likelihood, and timing, of the next bear market, Goldman Sachs created a proprietary “Bear Market Risk Indicator” which at the time had shot up to 67% – a level last seen just before the 2000 and 2007 crashes – prompting Goldman to ask, rhetorically, “should we be worried now?”

While Goldman’s answer was a muted yes, nothing dramatic happened in the months that followed – the result of Trump’s $1.5 trillion fiscal stimulus which pushed the US economy into a temporary, sugar-high overdrive – aside from the near correction in February which was promptly digested by the market on its path to new all time highs (here one has to exclude the rolling bear markets that have hit everything from emerging markets, to China, to commodities to European banks).

At the time, Goldman wrote that it examined over 40 data variables (among macro, market and technical data) and looked at their behaviour around major market turning points (bull and bear markets). Most, individually, did not work as leading indicators on a consistent basis, or they provided too many false positives to be useful predictors. So the bank developed a Bear Market Risk Indicator based on five factors, in combination, that do provide a reasonable guide to bear market risk – or at least the risk of low returns: valuation, ISM (growth momentum), unemployment, inflation and the yield curve.